Reflexivity Research has just released a deep-dive report on the state of institutional Bitcoin yields, highlighting critical issues facing institutional Bitcoin holders and how Core’s recent launches offer a comprehensive answer.
The Institutional BTC Problem
Institutions are increasingly adopting Bitcoin, custodying it as an inflation-resistant store of value. However, despite BTC’s resistance to monetary inflation, institutional BTC holdings are continually diluted—not by central bank money printing, but by custody fees. Holding BTC at scale comes with operational complexities, and institutional-grade custody solutions charge ongoing fees that steadily erode Bitcoin-denominated balances.
To offset these custody costs, institutions have historically had to take on new risks in order to generate yield. Lending BTC exposes them to counterparty risk, where borrowers may default or platforms may collapse. Trading strategies require active management and market exposure, forcing institutions to engage in risk-heavy maneuvers just to maintain the value of their holdings. The dilemma is clear: either absorb the cost of custody and watch BTC holdings shrink over time, or take on additional risks to generate enough yield to offset the fees. For many institutions, neither option is ideal.
Bitcoin Staking: A Safer Alternative
Bitcoin staking changes this dynamic by offering a fundamentally safer way for institutions to generate yield. Unlike lending or trading strategies, which introduce counterparty or market risks, staking provides a native yield opportunity without exposing institutions to additional risk. Instead of relying on external borrowers or market movements, BTC staking simply allows holders to earn a return on their Bitcoin while maintaining its underlying security. This makes it a far more attractive option for institutions looking to offset custody fees without jeopardizing their holdings.
For institutions that already generate yield on their BTC, staking is the preferred choice because it offers returns in the safest possible manner. However, traditional BTC staking has one major drawback—it requires locking up Bitcoin, making it inaccessible for collateralized trades or other institutional use cases. Institutions that rely on BTC as collateral to borrow stablecoins, execute trading strategies, or manage liquidity cannot afford to give up access to their holdings. While staking eliminates the risks associated with other yield-generation methods, the loss of liquidity makes it impractical for many institutional participants who need the flexibility to deploy their BTC.
lstBTC: Unlocking Security, Yield, and Liquidity
lstBTC takes staked Bitcoin and makes it liquid again. As an asset backed by Bitcoin and Bitcoin staking yield, lstBTC resolves the problems faced by institutions. It requires no change in custody arrangements. It generates yield without risking principal. And it is represented by a liquid token that can be used just like regular Bitcoin. Institutions can post it as collateral to trade or borrow against, all while the yield offsets their custody fees.
With Bitcoin being the most widely used digital asset for collateral, the ability to generate staking yield without sacrificing usability makes lstBTC a breakthrough for institutional holders. Instead of being forced to choose between security, liquidity, or yield, institutions can now have all three. Staking yield-generating Bitcoin can finally serve every institutional use case, unlocking new capital efficiency across the market.
How Institutions Can Use lstBTC
One critical component Reflexivity Research reveals are some key use-cases for liquid staked Bitcoin, which include:
Basis Trade on Stablecoins – Institutions commonly post BTC as collateral to borrow stablecoins and execute basis trades, earning 20%+ on stablecoin yield opportunities (e.g., Ethena). Instead of paying custody fees, lstBTC allows them to earn an additional 1-9% on top of their existing returns.
Derivative Basis Trades – Many institutional traders use BTC as collateral for basis trades (e.g., selling futures while buying spot BTC). With lstBTC, the collateral itself earns yield, improving capital efficiency.
General Institutional Holdings – Hundreds of billions in BTC are held in custody or posted as collateral without earning yield. lstBTC eliminates this inefficiency, turning idle assets into yield-generating collateral.
Dive into the Full Report
Reflexivity Research produces top-tier, institutional-grade research, and this latest report provides deep insights into the current state of institutional Bitcoin yields. It breaks down how institutions are navigating the challenges of BTC custody, the trade-offs they’ve historically faced, and the solutions that are now emerging to reshape the landscape. As Bitcoin yield generation becomes a greater priority and liquid staking gains momentum, it’s clear that Core will be a cornerstone of the next wave of institutional adoption.